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The Annals of Regional Science
Erschienen in: The Annals of Regional Science 2/2013

01.10.2013 | Original Paper

Agglomeration, congestion, and regional unemployment disparities

verfasst von: Ulrich Theodor Zierahn

Erschienen in: The Annals of Regional Science | Ausgabe 2/2013

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Abstract

Regional labor markets are characterized by huge disparities between unemployment rates. Models of the New Economic Geography explain how disparities between regional goods markets endogenously arise but usually assume full employment. This paper discusses regional unemployment disparities by introducing a wage curve based on efficiency wages into the New Economic Geography. The model shows how disparities between regional goods and labor markets endogenously arise through the interplay of increasing returns to scale, transport costs, congestion costs, and migration. The level and stability of regional labor market disparities depends on the extend of labor market frictions.
Vorheriger Artikel Core–periphery dynamics in the Portland, Oregon, region: 1982–2006
Nächster Artikel Endogenous R&D spillover and location choice in a mixed oligopoly

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Fußnoten
1
Blien (2001) delivers results for Germany, Nijkamp and Poot (2005) present a meta-analysis, Blanchflower and Oswald (2005) and Montuenga-Gomez and Ramos-Parreno (2005) survey empirical results.
 
2
Blanchard and Katz (1992) focus on the role of shocks for regional labor market dynamics rather than the wage curve per se. However, according to Elhorst (2003), they present the probably most encompassing model of regional labor markets.
 
3
Examples are Chen and Zhao (2009), Helpman and Itskhoki (2010), Helpman et al. (2011), Méjean and Patureau (2010), Monford and Ottaviano (2002), Picard and Toulemonde (2006), or Strauss-Kahn (2005).
 
4
Examples are Peeters and Garretsen (2004) and Pflüger (2004).
 
5
Peach and Stanley (2009) present a meta-analysis of existing evidence.
 
6
By replacing Eqs. 2 and 3 through housing supply, a housing-market can be explicitly modeled within the same framework, see e.g. Helpman (1998) and Pflüger and Südekum (2008).
 
7
See for example Fujita and Thisse (2002).
 
8
Our wage curve hence relates real wages to the unemployment rate. Empirical studies from the wage curve literature usually rely on nominal wages due to lack of regional price data, whereas theoretical models for the wage curve are foremost based on real wages. However, empirical analyses using real wages show that the wage curve results also appear when regional price levels are available, see for example Eckey et al. (2008).
 
9
Baldwin (2001) further shows that the “history vs. expectations”-discussion of the core–periphery model needs a reevaluation when using forward-looking expectations, though this is not relevant in our case since we do not address this discussion. Further results regarding forward-looking expectations in the core–periphery model are presented in Baldwin et al. (2003).
 
10
The basic function of the agricultural sector is to serve as a reference for prices and wages. We do not need the sector as a centrifugal force due to the presence of congestion costs. However, alternative approaches to fix the price levels or to gain a reference for prices are more complex without qualitatively changing the results. Hence we decide to keep the agricultural sector in our model to keep the analysis as simple as possible.
 
11
If one unit of the manufacturing good is transferred to the neighboring region, only 1/\(\tau \) units arrive. Therefore \(\tau \) units have to be sent when one unit shall arrive.
 
12
The real wage in region \(r\) is \(w_r K P_r^{-\mu }\).
 
13
The chance to find employment depends on the endogenous job creation rate which is directly linked to the unemployment rate.
 
14
Additional results for these parameters are available upon request from the author.
 
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Metadaten
Titel
Agglomeration, congestion, and regional unemployment disparities
verfasst von
Ulrich Theodor Zierahn
Publikationsdatum
01.10.2013
Verlag
Springer Berlin Heidelberg
Erschienen in
The Annals of Regional Science / Ausgabe 2/2013
Print ISSN: 0570-1864
Elektronische ISSN: 1432-0592
DOI
https://doi.org/10.1007/s00168-013-0555-3

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